All Forum Posts by: Jay Hurst

I thought I would just summarize what has been said in this thread in how financing works in a LLC from a lenders perspective:

1. Can I put a conventional loan in a LLC?

Fannie/Freddie will NOT allow you to vest in a LLC or any entity other then a revocable trust. So, a conventional loan that has the bests rate/terms has to be in your personal name no matter who the lender is.

2. Based on number 1, can I close in my name and move the conventional loan over to a LLC?

If you do, you have violated your due on sale clause because you essentially sold the property to your LLC. Your LLC was not underwritten for the loan, you were. Do people it? You bet, but if the servicer finds out they right to call the note due in full. That is what you signed at closing.

3. can you get any loan in a LLC?

You bet. You just have use a portfolio/commercial purpose loan and have your LLC underwritten along with everything else. The vast majority of these would still be recourse loan and show up on your personal credit but can vest in your LLC.

4. What are the terms of loans that will vest in a LLC?

Of course it will depend on the lender/loan program but the terms are NOT going to be as good as a conventional loans (Fannie/Freddie backed loans) But, you CAN absolutely get 30 year fixed and 30 year amortized loans. 

@Sonu SundarAssuming you have good credit, you can get either a conventional loan or a portfolio loan with only 15% down for a 30 year fixed/30 year amortization. A lot of lenders will tell you 20% down or more for SFR non-owner occupied but that is because they have an "overlay" on their conventional loans. But, Fannie Mae does absolutely allow 15% down (as either 85% one lien or a a 75% first lien with a 10% second lien)as do many portfolio lenders (but Fannie will be much better rates/terms) This will allow you max leverage @Allyssa McCleery mentioned in her post.

Again, Fannie will only allow this for single family as they require 25% down for a 2-4 unit but there are portfolio programs that will allow for a 30 year fixed with 30 year amortization. 

Conventional loans (fannie/Freddie) require you to have owned the property for 6 months before using the stepped up value to pull cash out. You can rate term/refi (no cash out) with a conventional loan right away with the new value as mentioned above.   

However, there are portfolio loans available with NO seasoning meaning with a solid appraisal you can pull cash out using the new improved value. 

You do not necessarily have to have experience too vest a property in a LLC. Do it all the time for first timers. You do need to qualify of course so need decent assets/credit etc.

This is an old thread but still looks to be a bit unanswered. I just stumbled on it and noticed I am mentioned in the above post. So, thought I would answer it hopefully thoroughly. 

There is NO law in Texas that precludes you from taking cash out of an investment property in Texas. The only laws regarding cash out are around homesteads. But, because homesteads are a bit hairy in Texas a lot of big lenders just simply do not do them just to make sure they do not run afoul of the Texas A(6) law. The rank and file loan officers are just confused and say cash out of investment properties are illegal in Texas because they know there are some sort of restrictions on cash out and Texas.  So, not Texas law issue period. 

You do NOT have to own a homestead outside of Texas. You can rent in say CA, but still take cash out of a non-owner property in Texas. But, many lenders who might generally allow for cash out on non-owners are afraid of this situation because they are concerned that it might really be your homestead since you have not bought a new house. So, they have an overlay.  For us, it has to pass the smell test. If you have moved to CA (or have always lived in CA and invested in TX) and your life, job etc are in CA then we are comfortable that you are not trying to disguise a  homestead as a non-owner to skirt the A(6) law. 

Hope that helps!

@Kevin Hassold   As it has been pointed out, your issue has nothing to do with Texas state law. Texas law only applies to homesteads. Fannie/Freddie both have the 6 months of seasoning before you can use the improved value. 

You can borrow up to 75% of a non-owner occupied single family with Fannie/Freddie before six months using the purchase price, not the improved value. This is called delayed financing.

What you and @Michael Caine are looking for is a Portfolio loan. That simply means the lender will keep the loan on their own portfolio and not sell the loan to Fannie/Freddie. That way the lender can set their own rules, so again since non-owner occupied properties do not fall under Texas law, a portfolio lender can use what ever seasoning requirement or even have no seasoning requirement they want. But, because the loan is to be kept on the lender's books the rates/terms are not as attractive as Fannie/Freddie.

I have investors as well as our own money that make these "non-seasoned" loans to well qualified borrowers. So, yes they do exist, just a bit harder to find and more expensive.

There are programs that look only at the cash flow on the property itself and ignore any other income/debts. You do have to reasonably good credit so not sure if you have a long enough history with only being in the country a short time. But, the cash flow loans absolutely exist and we do a lot of them.

It has been said, but Fannie will go up to 10 properties. Should be zero problem for most lenders.

I would agree with the above as there are lenders who do not know Fannie/Freddie requirements or have overlays that tighten their requirements above and beyond Fannie/Freddie. 

But, if you cannot qualify conventionally there are products that do not take into account your income but rather simply the cash flow of the property itself. Higher rates then conventional but lower then your hard money rates. 

You can absolutely get a NOO property vested in a LLC with a 30 year amortization that is also a 30 year fixed loan. The rate will be high, maybe two points higher then conventional, but it can be done.